5 Factors to Consider Before Investing

May 28, 2018

5 Factors to Consider Before Investing

There is an infinite number of investment opportunities out there for people who have a bit of extra cash and don’t want it to simply sit in a bank vault somewhere, making little interest. By making investments, you can have a bit of fun with your money and broaden your financial horizons at the same time. But where do you start? What do you do? Let’s answer those questions and more by giving you five points to consider before you start investing your money.Why Are You Investing?

The number one question, and for a good reason. There should be a financial goal behind your decision to invest. Otherwise, you might not make the right choices. If your goal is to give your children a nest egg when they turn 18, then you’ll want it to be something with less risk, with the potential to grow over time. Whatever your reasons, you should know why you want to invest before you make any decision.

Can You Afford It?

The vast majority of people invest their money because they have it to spare, but that doesn’t mean that they can afford it. Your decision to invest – and the amount of money you are willing to invest – should be made with your wider financial situation in mind, as you don’t want to find yourself in a difficult situation down the line should your investment not pay off. Always speak to your partner before you make any financial decision, too.

The Risk/Reward Factor

Every investment opportunity has a degree of risk attached to it, and that is why, when an investment pays off, it is always an exciting and addictive experience. Your investment decision has to be made with the risk/reward factor in mind, and consider the financial ramifications before you start investing your money in the direction of something that might not turn out to be as lucrative as you expected.

How Are You Going to Invest?

Whether you are going to play the stock market or invest in a friend’s small business, you should shop around and carefully consider your options before you take the plunge. There’s a wide range of online investment platforms and robo-advisors, such as Canada’s Wealthsimple review Canada, that let you invest from afar. Wherever you are in the world, do your homework, read reviews and talk to people about which opportunities you should take. That way, you’re more likely to find the one that works best and will be most lucrative for you.

Be Wary of Fraudsters

One of the unfortunate sides of the investment world is the existence of fraudsters, who are incredibly smart and ruthless in the ways they will conjure up to try and steal your money with investments that don’t exist. These are often in the form of emails asking you to invest in a golden opportunity, which they will try to legitimize with news stories and quotes from leading authorities, in the hope that this will lure you in. Their success rate is sadly higher than it ought to be, so be wary when people approach you with an offer that sounds too good to be true. There’s a good chance that it will be.